Singapore Airlines (SIA) reported a 6.7% YoY growth in revenue to S$4.1b for 1QFY20, driven by higher flown revenue (+6.3% YoY). Passenger flown revenue improved 8.8% YoY on the back of higher traffic growth (+8.1%) and capacity (+6.6%) while cargo flown revenue dropped S$45m, or 8.4% YoY. The uncertainties over the US-China trade dispute and economic slowdown could continue to weigh on cargo demand.

1QFY20 net profit fell 20.7% YoY, or S$29m to S$111m, which was below ours and the street’s estimates. The decline was primarily due to a higher share of losses from associated companies which reported a loss of S$31m.

Expenditure increased by 6.9% YoY, or S$251m to S$3.9b. Net fuel-cost was up 8.7% YoY, or S$94m, due to higher volume uplifted on capacity expansion and a stronger US dollar.

We maintain BUY on SIA but place our fair value of S$11.02 under review pending further details from the briefing.

Source: OCBC Research - 1 Aug 2019